Car loans are the gateway to owning your dream vehicle. However, if this is the first time you're applying for a loan, it's important to understand the policies and terms before you take a leap. It's easy to get lost amidst several misconceptions and myths surrounding car financing, which is why we always suggest doing your due diligence and reading the terms carefully, no matter the length of the document. Let's bust the five common misconceptions surrounding car loans.
1. You can't get a better deal than the first one.
Most people make the mistake of settling for a loan too quickly. No matter how attractive a deal sounds, you must look for other options. Even if you settle for a loan and regret it later, there's always the option of auto refinancing.
2. You cannot get a loan for used cars.
Another common misconception among people is that you cannot avail a loan to purchase a used car. This is far from the truth because there are many dealerships that provide used cars and will happily finance your vehicle with a good interest rate.
3. Once you get into a bad loan, it's impossible to get out of it
Much like the first misconception, this one is also about settling too early for a loan that didn't give you the best terms. Thanks to auto refinancing, getting out of a bad loan is very much possible.
Car refinancing allows you to get a better interest rate and make changes to your loan terms and duration. However, don't make the mistake of settling too quickly again, and make sure to look for multiple options.
4. A big down payment is necessary.
While it's always recommended to take your time before deciding to apply for a loan, don't hesitate to do it just because you think there's a huge down payment required. Many dealerships and banks give you the option of a down payment as low as 15%.
5. Auto loans with a long duration save you money.
If anything, the opposite of this is true. A longer duration on your loan may give you the benefit of low monthly payments, but the overall interest rate is much higher, costing you more in the long run as compared to a short loan term.
While there are still many car loan myths yet to be debunked, what matters is how well you know what you want. Always consider the loan terms carefully, and do not hesitate to look around for better interest rates before you finally settle for a loan.